Why Walmart and Big Retailers Should Pay Their Workers More

Henry Ford famously decided in 1914 to pay many of his workers the then incredible sum of five dollars a day, which was substantially higher than the prevailing wage at the time.

While that wasn't done specifically to enable Ford's workers to buy his cars (his primary objective was to reduce employee turnover), it did at times have that effect. More important, Ford's innovation, which shocked the industrialists of that era, helped kickstart America's high-wage, high-consumption economy and the creation of its vast middle class.

Nearly a century later, in the midst of a weak economy and rising poverty, my colleagues at Demos, a New York-based think tank, have made a compelling case that Ford's revolutionary approach to industrial wages should now be applied to America's retail sector.

Retail is an enormously powerful force in the U.S. economy. It hauls in more than $4 trillion in annual revenue and employs more than 15 million people. The problem, and it's a huge one, is that many of the sector's dedicated and hard-working employees are badly underpaid. The typical retail sales person earns just $21,000 a year, with cashiers earning even less -- just $18,500, according to the Bureau of Labor Statistics. That's not much of a gateway to the middle class.

In a rigorous new study, Retail's Hidden Potential: How Raising Wages Would Benefit Workers, the Industry and the Overall Economy, Demos describes the broad benefits that would be gained if the nation's largest retailers established a voluntary wage floor of $25,000 for full-time, year-round employees.